‘Default would be best scenario for Greece’

Given the remaining differences in the approach to the bailout between the Greek government and the Troika, a default would be the best thing for the Greek people, Marco Pietropoli, London-based economist, told RT.

RT:Do you think
both sides of the dispute, the Greek government and the Troika,
will come to an agreement on Greek debt, considering the fact
that their approaches differ a lot?

Marco Pietropoli:“No”- is the short
answer. I think that they are both starting from extremely
different positions. The new Greek government was elected on a
mandate to end the painful austerity imposed by the Troika: the
IMF, the European Central Bank [ECB], and the EU, and to change
the situation for the Greek people which in practice meant either
a substantial renegotiation of the terms, or a default on the
debt. These are very, very different opposing situations because
the Troika effectively is saying: “Well, the previous Greek
government signed up to the terms of these bailouts, and the
terms of these bailouts should be maintained.” They are sort
of suggesting that they will be slightly flexible on the terms
but not completely redesigning the bailout. Because there is such
difference with the approach I don’t think that a negotiated
assessment is possible. My view is…that the best thing for the
Greek people is to default on their debts, and that is probably
the way it is likely to go.

RT:What can you tell us about the Greek
bailout? Why it hasn’t been effective?

MP: ... Let me make it clear: when we talk about
a Greek bailout, it is not a bailout of the Greek people. The
money that has been given to Greece over the last few years from
the Troika has gone nowhere near the Greek people. Something like
90 percent of the Greek bailout has been bailing out the
creditors of Greece. That is what it has all been about- it has
been protecting the creditors which in large part were European
banks, mainly the French and German.

What has happened over the last few years has given time for the
creditors of Greece to restructure effectively, what has happened
is that the Greek debt has been nationalized by the EU, by the
ECB, and by the IMF. That is quite a small amount of private debt
which Greece still owes money to. Any default will be principally
a default on the money which has been lent to them by the
Troika...

Many of the financial institutions in Europe and around the world
have been preparing for the eventuality of a Greek default. In
many ways a certain amount of firewalls have been built. But this
is new territory- there is no precedent of a country within the
euro defaulting on its debts and potentially exiting the euro...

RT:While creating the EU, were the
countries like Germany and France expecting such negative
economic outcome?

MP: ... The EU has developed over decades into
really something that in my view was not what they originally
planned it to become- more and more like a state rather than what
it was originally planned to be, which was a free trade area and
no more walls. A lot of the movement towards effectively a
federal European state has been quite an undemocratic process.
When it comes to Greece we know that when it originally applied
to join the eurozone it was turned down. I believe they then went
away and employed the likes of Goldman Sachs to help them
reapply, and eventually they were accepted into the eurozone.
That was done on the basis that they would introduce a certain
amount of reforms which they never really did- they still have
many protected professions, the tax collection was never really
done properly, then the amount of corruption still carried on.

You can put euro in the pocket of a Greek person, or an Italian,
or a Spaniard but that doesn’t make them German, and it won’t
change the way that they are as human beings, as a social group-
it won’t increase their productivity. The way a lot of Europeans
are worried is that if they were to exit the euro, they would
simply fall back into their own corrupt system which they don’t
like...

I think there is some solidarity but what no one wants to accept
is that the euro itself is creating poverty in many countries in
Southern Europe, or what they call the periphery of Europe. It
has to be accepted that these countries are at best in a
depression, at worst are continuing to decline. But at the same
time they are continuing to build more and more debt. More debt
is not the solution, and the only way to change the situation is
to change the structure of the euro. But I don’t think that
without crisis that would happen.

RT:You said that the euro is creating
poverty. So why do you think so?

MP: Pre-euro you had Greeks with the drachma,
Italy with the lira, and Germany with the Deutsche mark. The
difference in productivity and in the quality of the overall
economy, not just productivity but the political system, the
whole economic system, the amount of tax system - all of that was
naturally decided between the exchange rate. So, weaker countries
had weaker exchange rate. When you fix the exchange rate there is
no way of changing, of replicating that without some kind of all
fiscal means.

Let me explain it in more simple terms. In the UK, for example,
there is peace because the richer parts subsidize the poorer
parts. Effectively, London and the South-east, broadly the South
of England is richer, more taxes are paid. What that means is -
that someone going to hospital or schooling in Newcastle or in
Northern Wales, broadly speaking gets the same kind of service as
someone that lives in Bristol. What you can’t have in a country
is a lot of rich people living right next to a lot of poor people
- that creates social problems, and potentially civil unrest,
revolutions, and the likes. What there has to be is a
redistribution of wealth so that there is peace within a country.

By fixing the exchange rate between the different countries, this
hasn’t been replaced by any fiscal means for ensuring that the
less productive parts of Europe have the investment necessary to
maintain the same kind of living standards.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.